Lawmakers seek answers about “Enron accounting” agency that seeks Congressional approval of a sweeping legal settlement
Press release from the Office of Congressman Jared Huffman:
In light of the nearly unprecedented penalties paid by the powerful Westlands Water District to settle Securities and Exchange Commission charges for misleading investors, Congressman Jared Huffman (D-San Rafael) today launched an investigation with several of his congressional colleagues into a major settlement agreement between Westlands and the federal government. The settlement agreement, currently pending in Congress, would forgive hundreds of millions of dollars owed by Westlands yet lacks key safeguards and assurances that the water district will hold up its side of the bargain.
The SEC recently charged Westlands and two of its top officials with misleading investors about its financial condition, noting that the water district had used “extraordinary accounting transactions” to hide the fact that insufficient revenues were available to cover debt obligations. The General Manager of the Westlands Water District called this practice “a little Enron accounting” to his board of directors, and both the General Manager, a former Assistant General Manager, and the Water District itself agreed to pay significant penalties to resolve the SEC charges.
Separately, Westlands negotiated a sweeping legal settlement with the U.S. Department of the Interior, resolving longstanding litigation over the management of drainwater from selenium-impaired farmland in the water district. While that settlement awaits Congressional consideration, the Interior Department continues to negotiate a similar agreement with Westlands’ neighboring water districts. However, as part of today’s investigation, Huffman released a new report from the Congressional Research Service that raises serious questions about the lack of safeguards in the Westlands settlement — safeguards that the Interior Department had previously identified as necessary for both taxpayers and the environment.
“The Westlands Water District plays by its own rules, and trusting them with an agreement of this magnitude should give every member of Congress serious pause,” said Rep. Huffman. “Anyone who compares their business tactics to Enron’s shouldn’t lightly be given a waiver of nearly $400 million owed to the U.S. Treasury, much less given a permanent water contract or carte blanche to manage the toxic discharge that could drain to the San Joaquin River and the Bay-Delta ecosystem. We need to know that the Westlands Water District didn’t get a sweetheart deal, and that the federal government is working to protect Americans’ financial and environmental interests.”
In launching the investigation, Congressman Huffman and his colleagues are today releasing:
- A Congressional Research Service Report that details the multitude of ways that the legal settlement reached between the Obama Administration’s Interior Department and the Westlands Water District fails to include key safeguards for the environment and for taxpayers, and falls far short of the principles laid out several years ago by the very same Interior Department.
- A Congressional letter to Environmental Protection Agency (EPA) Administrator Gina McCarthy urging her to review the Westlands settlement to ensure that the EPA and other federal agencies are prepared to respond to the serious risks that the settlement might pose to water quality. Cosignatories include Mike Thompson (D-St. Helena), Jerry McNerney (D-Stockton), Mark DeSaulnier (D-Concord), Doris Matsui (D-Sacramento), and John Garamendi (D-Walnut Grove).
- A Hearing Request to the Natural Resources Committee calling for oversight to be conducted on the Westlands settlement, including a request that Westlands’ General Manager, Thomas Birmingham, be asked to testify under oath in light of the recent SEC enforcement action. Fellow Natural Resources Committee Democrats Alan Lowenthal (D-Long Beach), Grace Napolitano (D-Norwalk), and Lois Capps (D-Santa Barbara) also joined Rep. Huffman on the hearing request letter to Chairman Bishop.
- A letter to President Obama authored by Congressman Jerry McNerney (D-Stockton) asking that the President direct his Administration to answer tough questions about the settlement signed with Westlands. Cosignatories in addition to Huffman include Mike Thompson (D-St. Helena), Mark DeSaulnier (D-Concord), Doris Matsui (D-Sacramento), and John Garamendi (D-Walnut Grove)
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